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Bookmark and ShareEilís Lawlor is the acting head of the Valuing What Matters team at nef.

The Marmot report has made it clear – for better social wellbeing we must eradicate disparities in education, income and health.

Successive reviews and reports have consistently told us two things: that we live in an increasingly polarised society and that this is damaging to our social wellbeing. The latest – yesterday’s Marmot review – supports a widely held view that inequalities of health, education, income and opportunity are all inter-related, and that better education leads to longer, healthier lives, and educational attainment itself is affected by income inequality.

Sir Michael Marmot was commissioned to review health inequalities but his recommendations range from investments in early years to an increase in the minimum wage. This comes hot on the heels of the National Equality Panel report on income inequality and the launch of policy positions by all three political parties on the issue. Inequality is no longer an embarrassing legacy of old Labour; instead, all three parties are now falling over themselves to profess their concern. This raises an intriguing question: after decades of tolerating the rise and maintenance of high inequalities, do we now face the prospect of an election fought around the issue?

Social problems are often economic in their origin, and reforming the system itself is the most powerful policy tool that we have at our disposal. A truly preventative approach starts with the structures and institutions that shape our lives: the destabilising income inequalities, the spatial concentrations of unemployment and poverty, the focus on growth as a proxy for social welfare to the neglect of other outcomes.

Late last year we at the new economics foundation produced a report that looked at the economic case for investing in early years. We calculated that by 2030 savings of about £400bn could be made in return for big investments now in universal childcare, extended parental leave and an holistic suite of preventative services. The response from policy-makers and commentators was that it was “too ambitious”. It is a sobering thought that it is too ambitious for one of the world’s biggest economies to aim for outcomes for children similar to its less well off European neighbours.

Inequality is not inevitable. But in the absence of countervailing forces trends such as globalisation, changing demographics and family structure will increase it. Yet, other countries manage to counteract these forces, whether it’s childcare in Sweden, education in the Netherlands, or land redistribution in South Korea. Labour has of course tried (a bit), and it has identified many of the right points of intervention. The problem is that it either didn’t go far enough (not indexing the minimum wage to incomes) or it left key drivers untouched (industrial policy).

Tackling inequality, at least in the public imagination, is overly synonymous with redistribution through the tax and benefit system. Discussion of the forces that influence different wages is notably absent, which might suggest that people think that the pre-tax distribution of incomes is broadly speaking “fair”. But the fact that a senior banker can earn 4,400 times what a nursery worker earns is not fair and is not an accident. It is in opening up this debate and in helping to highlight the determinants of inequality that the Marmot report is so welcome. The research is in, the arguments have been won, now it is time to act on them.

Bookmark and ShareEilís Lawlor is the head of the Valuing What Matters team at nef.

Photo by Jay Bergeson via Flickr

The start of the year 2010 is marked by a post-Copenhagen melancholy, the crisis in Haiti, and the actual occurrence of the proverbial blue moon. And obviously the snow, bringing much of the country to a halt.

Conventional wisdom says the snow has been bad for Britain, with lost economic output of between £230 million and £600 million a day.  These are substantial sums; not welcome news for British businesses also weathering a recession. But does this figure capture the most important aspects of the turmoil brought by the weather? We are all affected in different ways and surely to look at the financial loss to one part of society is too narrow a view. Valuing What Matters is all about looking beyond the easy-to-measure outcomes, and capturing those more intangible costs and benefits. Our valuing methodology – Social Return on Investment – brings a much wider range of outcomes onto the balance sheet.

So, what kinds of things are missed out in simply valuing absenteeism from work?  Well first there are other arguably more important costs. Most people care greatly whether elderly relatives and neighbours will cope and get the support they need. In addition, it is estimated that there are close to 1,000 people sleeping rough every night in the UK.  A focus on economic productivity has the effect of reducing the value of the costs and benefits to these citizens who are not in formal employment and are not big spenders.

And what about the positive impacts of the snow?  Most of us have seen the snow create a quantity of happiness as people spend extra time with friends and family, say hello to and help neighbours, build snowmen together and benefit from the simple visual pleasure of a world covered in clean snow.  Staying at home for work and school has led to impromptu family time, which has undoubtedly been both positive and negative!

2010 – a year of cuts
The year 2010 will be filled with political debate about public spending. When and to what extent should the state budget be cut? What areas should government continue to invest in?

Thinking about the value of snow is a useful way into explaining the challenge of calculating costs and benefits of public spending. People rely on traditional financial measurement not least because it is straightforward. This is part of the reason why discussions have taken the level of cuts as a starting point, rather than the outcomes we need most as a society, and how we share out the pie to try and achieve them. From a valuation perspective, there is a serious risk of false economies being created on a grand-scale as cuts sow the seeds of greater social deprivation and for heightened social problems in the future.

Our work in 2010 will continue to demonstrate the validity of this argument. A report examining spending in the field of youth justice will be published in the end February. Punishing costs will look at the consequences of high level of incarceration of children in England and Wales. It will show how the resources used in these mostly damaging interventions could be channelled into rehabilitation and prevention of crime. Such positive spending is not bloating the state budget; it is actively reducing the need for reactive expenditure elsewhere.

The second is our independent re-evaluation of the case for Runway 3 at Heathrow airport.  This project takes SROI methodology into the realm of infrastructure decisions for the first time.  We intend to add a fresh perspective to the highly-charged debate around Heathrow, and to demonstrate how a more holistic analysis can help achieve better, more accountable decision-making for infrastructure projects which can impact generations to come.

Looking Further Forward

The real value of work: In the same way that snow is not a purely economic issue, we will continue our research on the social, economic and environmental impacts of work. Later in the year, we will be building on the work behind A Bit Rich:  Calculating the real value to society of different professions, published just before Christmas.  The report generated huge media and public interest in Britain and abroad as it tapped into an instinctive feeling that the salary structure in our system is not following priorities for a healthy society.

Inequality: A new branch of the VWM work will look at, arguably, the biggest source of negative externalities in society: economic inequality. Economic inequality is not only unjust and corrosive for society it also results in lower health and wellbeing outcomes for everyone – even the rich. As we continue to see bankers receive obscene bonuses and tax havens for the already super rich it is more important than ever to be building a strong case for the political elite to make lowering economic inequality, rather than simply poverty, a policy priority. In particular, we will be unravelling the structural causes of inequality; highlighting the ways in which it has resulted in a number of social and economic misdemeanours in society including youth unemployment; and advocating policy solutions. Work is already underway – look out for our report written for the Joseph Rowntree Foundation which will be published later in the year.

The real price of a shopping basket:  The production of all goods has social and environmental impacts. As a rule, few of these impacts are reflected in the prices, but what if they were?  Would a locally grown, organic apple be cheaper or more expensive than an imported one? Would a train ticket cost less than a flight? Our report will provide some concrete examples of the real prices of items, as well as new insights into the debate on corrective taxes.

Privatization and outsourcing: Another area where an analysis of social value can provide surprising conclusions is the privatization and outsourcing of public services. Shifting the provision of services to the private sector is justified in terms of cost savings. But when the result is large cuts in payroll or the flooding of public space with advertising, these savings may be exceeded with indirect costs elsewhere. Our report on the topic will study the benefits and disadvantages of this trend.

There is much debate about whether snow will become a feature of the British winter and if the billions necessary to invest in snow-proofing our transport systems are worth it.  Perhaps by the time it snows next year we will have faced up to the level of investment needed to tackle climate change, which unlike snowfall has little upside.

Bookmark and ShareEilís Lawlor is the acting head of the Valuing What Matters team at nef.

Denham is relaxed about the rich, and now, it seems, about inequality too.

Denham is relaxed about the filthy rich, and now, it seems, about inequality too.

Imagine you are a Government minister whose party is dogged by accountability scandals, trailing badly in the polls and squarely in lame duck territory from a policy perspective. Imagine as well that you had recently taken (or been thrown) the reins of the department responsible for narrowing spatial inequalities but under which they had in fact widened. How would you frame a speech to set the tone for your tenure in this role?

Well if you are John Denham you clearly abdicate any responsibility for this fact by trying to claim that people don’t care about inequality anyway. Representative democracy has been brought low in recent times and many think it is on its knees. A cloying and calculated attendance to ‘middle class voters’ interests is hardly the shot in the arm it requires. The irony of Denham’s comments is that measures to tackle inequality under New Labour have been overwhelmingly focused on the poor because it was seen as more politically saleable, they were even famously (and oxymoronically) ‘intensely relaxed’ about people becoming ‘filthy rich’. Anyone who suggested otherwise was patronised into the political wilderness.

The hardest and arguably most important role a politician can play is to lead people where they fear to go, to promote a sense of shared purpose and collective responsibility amongst their constituency, even if the benefits are not immediately obvious. We know that inequality is bad for us all, rich and poor alike. John Denham and his advisors most likely know it too but don’t care to share it with the rest of us. There is a risk afterall, an inspirational speech on the issue might lose even more votes to the Conservatives. No, better to out-Tory them, appeal to narrow self-interest and perpetuate untruths about why redistribution matters. That’s the way to restore our faith in party politics.

Bookmark and ShareEilís Lawlor is the acting head of the Valuing What Matters team at nef.

SROI

Yesterday saw the launch of the new Social Return on Investment guide, co-authored by nef staff and backed by the Cabinet Office. This is good news for organisations and institutions that wish to account for their performance across the triple bottom line. It is also timely in the current economic environment when the pressure is on to cut costs and make immediate savings. Taking an SROI approach involves thinking about value in a different way – beyond costs and financial savings and over the longer-term. This is in sharp contrast with the recent budget proposals to claw back funds through efficiency savings; these are essentially cuts which will ultimately jeopardise frontline services. Where these services are delivering value, cutting back will lead to poorer outcomes and greater long-term costs.

A guide to Social Return on Investment

SROI promotes the idea of ‘social value’, a concept that is gaining increasing currency across the political spectrum. In some ways its legitimacy is indisputable; few people would argue that things that are bought and sold and have an ‘economic value’ are the things that matter most, yet in our daily lives we generally unwittingly accept that to be the case. What people have resisted is the notion that this type of value is measurable and quantifiable. While concerns about this are understandable they are misguided and ultimately unhelpful. Somehow we have convinced ourselves that what we pay for goods and services equates with some intrinsic value. Instead, what the market does – in fact what is effectively for – is to bring together people whose valuations happen to coincide. This ‘coincidence’ is called ‘price discovery’ but it is not uncovering any ‘true’ or ‘fundamental’ value, rather it is matching people who agree on what something is worth. Calculating social value is the same as this in virtually every way. The difference is that goods are not traded in the market and so there is no process of ‘price discovery’. This does not mean, however, that these social goods do not have a value to people.

Why does this matter? It matters because it is about more than the logic of an abstract philosophical debate. By ignoring value that is created and destroyed outside the market we have given far greater significance to things that are bought and sold than they perhaps merit. This has grave, practical implications that have helped to lead us down the shaky and unsustainable path we are now on.

The debate that has raged about the efficiency of the Post Office network encapsulates this well – people feel that there was a value to it beyond what can be measured financially, and yet decisions about its future are made largely on a financial basis. Measuring and quantifying social value will never be an exact science; the subjectivity of value makes that impossible. This did not prevent us creating markets and developing accounting practices to enable us to carry on the business of everyday life. Neither should it prevent us seeking to reduce inequalities and improve the health of the planet by bringing onto the balance sheet the real and costs and benefits of the decisions and trades that we make. SROI is the most developed and robust methodology available for doing this. It is now being mainstreamed in the third sector, which has led the way on innovative measurement but its potential is much greater than that. We need to get to a stage where our actions and behaviours are judged and rewarded by the extent to which we create or destroy value in its broadest sense, if we are to find an equitable and sustainable way through the many problems we currently face.

Bookmark and ShareEilís Lawlor is the acting head of the Valuing What Matters team at nef.

sroi-guide-coverHardly a week passes without news of looming cuts and fresh evidence of the implications of the recession for public services.

In a recession the temptation to cut back is strong. We have already had some worrying signals from Treasury – the hole in the government’s budget is to be clawed back in part through another £5bn in ‘efficiency savings’. So far these have amounted to stealthy cuts in frontline services under the guise of a leaner state. There is no reason to believe future rounds will be any different.

Yet government’s thin interpretation of efficiency is a false economy. Failing to invest now, when unemployment, crime and poverty are set to rise and an impending environmental crisis requires urgent investment, will only lead to costs of greater magnitude later.

Now more than ever we need to think about public spending less as a ‘carve up’ between competing ends and more as an investment in a better future. This cannot be achieved by penny pinching in the short term but by using the State’s resources to maximise the creation of public value – long-term social, economic and environmental outcomes.

A new approach to investment is needed that puts measuring and valuing what matters most to individuals, communities and societies at the heart of public sector decision-making. Such an approach, targeting positive social, economic and environmental outcomes, will lead to more informed policymaking, help build effective public services and have significant positive implications for the public purse.

nef research across three very different policy areas – economic development, children in care and criminal justice – shows the benefits of this approach. Valuing the improved well-being of children in care – rather than focusing on the unit cost of delivering that care – could help ensure that more appropriate placement decisions are made, improving the life chances of those children and offering a long term social return of £6 for every £1 invested. Savings over 20 years could pay for the entire annual care bill each year.

Women offenders are likely to fare better in life if custodial sentences are eschewed in favour of community penalties that enable mothers to maintain contact with their children. In the short-term money is saved on services for these children. Longer-term there is reduced risk of children becoming offenders and a better chance of the kind of educational attainment and social adjustment that will translate into lower societal costs through the welfare and criminal justice systems. Using Social Return on Investment we found that for every £1 spent on alternatives to prison that reduce reoffending, an additional £14 worth of social value is generated.

Measurement matters because it both reflects and reproduces the priorities of government and institutionalises behaviours. We are about to publish a set of principles for policymakers, that are a distillation of our research findings and can guide policy-makers who want to create better services. The first of these is about measuring outcomes: the positive and negative change in people’s lives, communities or the environment as a result of policy.

Despite rhetoric emphasising the importance of outcomes government still does not adequately measure the effects of its policies on long-term social, economic and environment well-being. Focusing solely on what is timely, tangible and easily quantifiable has not served us well: investment in public services has increased since the foundation of the welfare state, yet the place and circumstances of our birth predict our future health, educational and economic prospects now more than they did then.

Public services face the twin challenge of rising needs and increasingly constrained resources. Experience suggests that direct financial considerations on their own are not very helpful to meeting these challenges. As we lurch from one weak economic indicator to the next, it is easy to miss the opportunities this presents the State. There is too much at stake to get this wrong, not just in terms of social outcomes but also in financial implications for the public purse: ineffective public services cost us all more in the long run. To paraphrase Alistair Darling on banks, the response to the question, can we afford to invest in public services must be can we afford not to?

A version of this article was published in Public Servant Magazine.

Bookmark and ShareEilís Lawlor is the acting head of the Valuing What Matters team at nef


Amid the economic gloom, it is taken as a given that the state of the economy will surpass all other priorities at the ballot box. But as the American election demonstrates, the relationship between a person’s economic position and their voting preferences is not nearly that straightforward.barack-obama1

The principle of representation is at the heart of the type of democracy which we in the UK share with the United States. In theory, it’s meant to prevent elites from acquiring and maintaining power: it ensures that the legislature mirrors the nation’s constituents.

In practice, however, it doesn’t always work that way. It’s not unusual for people to vote for candidates who are quite unlike themselves, but who they think will represent their interests. I doubt that many people who elect the current Conservative Party front bench would aspire to join their clubs or their social circle. At other times, we vote – in good faith – for candidates who subsequently let us down. When small shopkeepers voted for Margaret Thatcher in their droves, they probably didn’t expect her to unleash a wave of deregulation that would culminate in one of the most concentrated business sectors in the world.

But nowhere has the link between class and voting preferences been as successfully eroded as in the US. The unholy alliance between economic neoliberals and social conservatives means that people will regularly vote against their own material interests for cultural, religious and patriotic reasons. So while 63% of voters said that the economy was their top concern this did not necessarily translate into a vote for the person, or party most likely to represent their economic interests.

Democracy is problematic for elites when 60% of the electorate earn less than $70,000. It’s not that the relationship between income and voter preference is inverse, the very rich also veer towards the Republican Party. It was only amongst minorities – where race played a greater role – that this asymmetry was turned on its head

The Republican base of poor white Southerners stayed loyal to a party that has cut taxes for the rich and eroded their healthcare and benefits and shunned Obama’s more progressive tax plan.

As well as capturing the language of human dignity and freedom, the right claim a monopoly on morality and national pride however narrowly defined. Hence, guns, God and abortion trumped jobs, insurance and a mortgage even during a month in which another quarter of a million swelled the ranks of the unemployed. This is fiendishly clever because it undermines the saleability of a more equitable system to the very people it should benefit thereby shifting the goalposts further rightward. Whether Obama’s consensus approach can reach those that reject their own economic representation remains to be seen.

Bookmark and ShareEilís Lawlor is the acting head of the Valuing What Matters team at nef

Results may not have been as bad as expected but still made for dismal reading in last week’s OECD report on inequality. At a time when the rewards of the rich are being called sharply into question, the UK still has one of the highest levels of income inequality in the developed world and social mobility is static. The rate at which inequality has widened is slowing, which is not the same as the gap narrowing. What we already knew has been confirmed: the proceeds of the global economic boom that is now unravelling have gone disproportionately to the already wealthy.

Any equalisation of incomes, however small, is to be welcomed but the media coverage of this missed the most salient point of the report: the gap between rich and poor has grown in more than three-quarters of all OECD countries over the past two decades. Have we and our media become so complacent with wealth accumulation in the hands of the few that this is considered positive, or are we just desperate for some good news?

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nef employees blog in their personal capacity. The opinions expressed here do not necessarily reflect those of the new economics foundation.